Here’s How Corporate America Is Screwing Millennials Out Of Their Fair Pay


If you’re a Millennial employee in the public or private sector, your wages are probably being suppressed to pay for the pensions of Baby Boomers who have one foot in retirement.

On March 6, 2017, the New York Times published findings by the Urban Institute—a thinktank that has been documenting ageist disparities in compensation packages that stifle the upward mobility of younger American workers. Their findings are corroborated by studies conducted in recent years by the UK-based policy center Resolution Foundation.

Generations are slippery and hard to define. Marketers Neil Howe and William Strauss maintain that Millennials were born between 1982 and 2004; Pew Research Center puts the goalposts at 1981-1997. But with the conversation about Millennials gradually shifting from vague stereotypes and generalizations to quantitative socioeconomics, generational thinking is no longer the shallow zodiac of the social sciences. It has become a proxy for the politics of class.

When it comes to rewarding the young, the public sector gets an ‘F’

The Urban Institute’s research describes the public sector as a site of intergenerational warfare. The policy center graded the state-run pensions of all 50 states plus the district of Columbia, assessing how well America’s school districts, universities, police and fire departments, and local governments distribute benefits evenly among age cohorts.

The data set’s goal is to see how good a given state pension is at letting Millennial employees see returns on their pension payments before the age of 35. In the category “Rewarding Younger Workers,” no state pension plan received an A from the Urban Institute. 14 received a B; 16 received a C; and 21 received either a D or an F. In other words, when it comes to rewarding younger workers by allowing them to accrue a higher amount of pension benefits earlier rather than later, the Urban Institute posits that the vast majority of state employers are either average of failing.

“As teachers across the country retire, their pensions are being subsidized by [new hires],” wrote Karl Russell and Mary Williams Walsh in the New York Times. “As more and more pension plans develop shortfalls, states have been imposing cost-cutting measures, and research shows that the newest hires are bearing the brunt of the changes.”

Millennial wage throttling—the British example

How did we arrive at this state of affairs? The Resolution Foundation has answers. Authored in June 2016 by researcher Lauren Gardiner, the British thinktank’s Intergenerational Commission produced a report titled “Stagnation Generation.”

Gardiner blames “defined benefit contribution schemes” for the generational disparities seen in wages. These are packages of promised benefits that employers made to employees in the salad days of the 1980s and 1990s, when it seemed like the economy would soar forever. Some cocky corporations even took lengthy contribution holidays from putting money into employee retirement funds, believing that the assets already contained in these pensions would continue growing at a robust rate.

When various bubbles of the 20th and early 21st century burst, the value of the securities in these retirement accounts evaporated. To compensate, corporations employed cost-cutting measures to restore their funding positions. These measures involved denying defined benefit packages to younger employees—and they also entailed depressing the wages of younger hires, then rerouting those funds to subsidize the benefits of the aging Boomer workforce.

“Young people have seen the biggest pay squeeze in the aftermath of the financial crisis,” writes Gardiner in her summary of the British private sector. According to Intergenerational Foundation researcher Matt Hitchens, an estimated £42 billion of potential pay raises for younger employees are lost to pension payments that go to the oldest and wealthiest British workers.

American corporations eat their young

You don’t need to look all the way to America’s parent country to see struggling young people.

A study conducted by the American Legislative Exchange Counsel in June 2015 placed the total pension debt of America’s state and local governments at $4.7 trillion—an astounding 22% of America’s GDP. New York and Illinois have unfunded pension debts in excess of $300 billion each. California’s estimated pension debt (a whopping $550-$750 billion) is such a crisis that California lawmakers are expected to bring a statewide pension reform measure to the ballot in 2018.

In the meantime, pension debt will be quietly financed by the declining fortunes of Millennials. The University of California’s Board of Regents voted to increase student tuition by 25% to bail out the school’s underfunded pensions. In a 2016 op-ed for Forbes Magazine, Lawrence McQuillan — director of the Center on Entrepreneurial Innovation at the Independent Institute — exclaimed that “the unwillingness to properly manage pension plans pushes the cost onto younger people and future generations.”

With America still reeling from the Great Recession in 2009, the Social Security Administration published a bulletin titled “The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of Baby Boomers.” The paper noted that 46% of the defined benefit pension plans in America’s public sector were underfunded. The document does not mention Millennials specifically—but it does explain that ageist disparities in wages and retirement packages are so intense that younger Baby Boomers who narrowly missed out on defined benefit packages are losing “wealth accrual” relative to their older counterparts.

The SSA explains that the economy’s “shift away from manufacturing [and] toward service” led to the decline of defined benefit pension packages. Indeed, Millennials are increasingly employed in fields like food service and caretaking, which are largely less well-compensated than the golden age of assembly line jobs in factories. As a result, retirement is for many Millennials an increasingly distant goal prefaced by a 21st century world of work that feels like an obstacle course.

Deconstructing the ‘Millennial screw-up’ narrative

Television shows like Insecure and movies like Frances Ha (2013) encourage us to see the bungling adulthood of Millennials as a matter of light-hearted comedy. “They want to keep you in debt,” Maya Kazan tells Greta Gerwig’s character in Frances Ha. “I know that,” Gerwig replies, meeting the tension with comedic relief; “I see documentaries.”

But there’s nothing funny about debt. In a scorching essay titled “But Seriously Let’s Talk About Millennial Poverty,” writer Hanna Brooks Olsen declares that “when we talk about Millennials, we can’t not talk about the debt that keeps us reigned in.” That debt is powered by the predatory market of student loans and credit cards. But it also consists of lost wages that go towards cushioning the retirement of older employees. Olsen cites a 2014 study detailing how median wages for 18 to 24-year-olds have declined or remained unchanged during the last decade in industries related to education, retail, and service work.

For Millennials, the titular “insecurity” of Issa Rae’s television series is not just personal and psychological. It’s also structural and fiscal.

The Millennial search for solutions

While Millennials lead hardscrabble lives of precarity and doubt in increasingly unaffordable American cities, retiring Boomers have come to expect generous Social Security benefits. Pulled disproportionately from the paychecks of Millennial workers who will not see the same cushy retirement when they age, observers have pointed out that Boomer returns on these entitlements are many times greater than the gains they would have seen if they invested the Social Security taxes withheld from their paychecks in high-performing index funds.

With the median pay of Millennials hovering around poverty level, it is no accident that America’s youth tend to favor policies that advance a radical redistribution of wealth. In the 2016 presidential election, Millennial support buoyed Bernie Sanders’ message of “democratic socialism,” with Sanders noting in his 2016 memoir Our Revolution that his campaign won “strong majorities of young people [in] virtually every state.” Concurrently, the leftist organization Democratic Socialists of America has experienced a 300% increase since November 2016, fueled largely to rising rates of Millennial membership. A Harvard University survey released in April 2016 showed 51% of 18-to-29 year old respondents declining to say they supported capitalism.

Millennials can learn to articulate feasible alternatives to failed economic policies in the marketplace of ideas. If companies will not extend plush defined benefit compensation packages to young people, we should lobby to create portable retirement savings accounts. As a result, we would be able to benefits for retirement no matter what kind of jobs we work: freelance, temporary, or salaried. Portable retirement accounts like the kind advocated by entrepreneur-economist Nick Hanauer would also combat shady employers who hire Millennials on a nominal “part-time” basis for 39-hours-a-week in order to avoid paying benefits that would come from a 40-hour-a-week commitment.

And if it’s possible to withhold a portion of your paycheck to subsidize a massive entitlement program like Social Security, we should seriously consider what it would look like to tax big businesses at a rate that would subsidize a Universal Basic Income for unretired Americans. If every adult had a livable income simply by virtue of being a freeborn American citizen, we would probably see far fewer struggling-adult narratives like Girls and 2 Broke Girls. And that’s a good thing.

A dying system’s last breath

The Millennial condition is a generational deadweight wrapped inside of a bank statement with a negative balance. While an endless stream of internet articles ask why Millennials are not purchasing homes, getting married, or having kids at the same rate as their parents, we’re all too familiar with the fiscal pressures that are preventing us from doing so.

In 1852, Karl Marx wrote “the tradition of all dead generations weighs like a nightmare on the brains of the living.” But unfortunately for Millennials, the tradition of defined benefit pension schemes and the resulting wage suppression is alive and well.

Who, if not us, will deliver this dying system a decisive deathblow?